Inflation rises in August
Inflation accelerated as expected in August, driven by record annual increases in clothing, footwear and furniture and the biggest rise in household bills in two years, official data showed.
The Office for National Statistics said consumer prices rose 0.6 per cent last month, taking the annual inflation rate up to 4.5 per cent, from 4.4 per cent in July, in line with analysts’ expectations.
The ONS said the main drivers for the pick-up was a 5.1 per cent annual rise in the housing, water, electricity and gas component. This was the biggest rise since July 2009 and reflected price hikes of almost 20 percent by some utility companies which came into effect in August.
The clothing and footwear, furniture, and restaurants and hotels components rose at their fastest annual rates since records began in 1997.
The Bank of England has said it expects higher utility prices to drive consumer price inflation up to 5 percent this year – more than double its two per cent target.
But it also expects inflation to ease over the next couple of years to below target.
Tuesday’s data is therefore unlikely to alter market expectations that the Bank will opt later this year to inject more stimulus into the economy to boost growth.
The retail price inflation gauge, which includes more housing costs and is the benchmark for many wage deals, picked up more than expected to 5.2 per cent, versus a forecast rise of 5.1 per cent.
Separate data published by the ONS on Tuesday showed the goods trade deficit with the rest of the world widened unexpectedly to £8.922bn in July, against forecasts for a modest narrowing to 8.50 billion pounds.
The trade deficit with non-EU countries narrowed slightly less than expected to £5.505bn.